[Federal Register: March 14, 2005 (Volume 70, Number 48)]
[Notices]
[Page 12507-12517]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr05-111]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51304; File No. S7-24-89]
Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment No. 14 to the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis, Submitted by the
Pacific Exchange, Inc., the National Association of Securities Dealers,
Inc., the American Stock Exchange LLC, the Boston Stock Exchange, Inc.,
the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc.,
and the Philadelphia Stock Exchange, Inc.
March 2, 2005.
I. Introduction
Pursuant to Rule 11Aa3-2 \1\ and Rule 11Aa3-1 \2\ under the
Securities Exchange Act of 1934 (``Act''), notice is hereby given that
on February 17, 2005, the Pacific Exchange, Inc. (``PCX'') on behalf of
itself and the National Association of Securities Dealers, Inc.
(``NASD''), the American Stock Exchange LLC (``Amex''), the Boston
Stock Exchange, Inc. (``BSE''), the Chicago Stock Exchange, Inc.
(``CHX''), the Cincinnati Stock Exchange, Inc. (``CSE''),\3\ and the
Philadelphia Stock Exchange, Inc. (``Phlx'') (hereinafter referred to
collectively as ``Participants''),\4\ as members of the operating
committee (``Operating Committee'' or ``Committee'') of the Plan
submitted to the Securities and Exchange Commission (``Commission'') a
proposal to amend the Plan. The proposal represents the fourteenth
amendment (``Amendment No. 14'') made to the Plan and reflects several
changes unanimously adopted by the Committee. The Commission is
publishing this notice of filing and immediate effectiveness to solicit
[[Page 12508]]
comments from interested persons on Amendment No. 14.
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\1\ 17 CFR 240.11Aa3-2.
\2\ 17 CFR 240.11Aa3-1.
\3\ The Commission notes that the CSE changed its name to the
National Stock Exchange, Inc. See Securities Exchange Act Release
No. 48774 (November 12, 2003), 68 FR 65332 (November 19, 2003) (File
No. SR-CSE-2003-12).
\4\ PCX and its subsidiary the Archipelago Exchange were elected
co-chairs of the operating committee (``Operating Committee'' or
``Committee'') for the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on an Unlisted Trading Privilege Basis (``Nasdaq
UTP Plan'' or ``Plan'') by the Participants.
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II. Background
The Plan governs the collection, consolidation, and dissemination
of quotation and transaction information for the Nasdaq Stock Market,
Inc. (``Nasdaq'') National Market (``NNM'') and Nasdaq SmallCap
securities listed on Nasdaq or traded on an exchange pursuant to
unlisted trading privileges (``UTP'').\5\ The Plan provides for the
collection from Plan Participants and the consolidation and
dissemination to vendors, subscribers, and others of quotation and
transaction information in ``eligible securities.'' \6\
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\5\ Section 12 of the Act generally requires an exchange to
trade only those securities that the exchange lists, except that
Section 12(f) of the Act permits UTP under certain circumstances.
For example, Section 12(f) of the Act, among other things, permits
exchanges to trade certain securities that are traded over-the-
counter (``OTC/UTP''), but only pursuant to a Commission order or
rule. For a more complete discussion of the Section 12(f)
requirement, see Securities Exchange Act Release No. 36481 (November
13, 1995), 60 FR 58119 (November 24, 1995).
\6\ The Plan defines ``Eligible Securities'' as any Nasdaq
National Market or Nasdaq SmallCap security, as defined in NASD Rule
4200, (i) as to which unlisted trading privileges have been granted
to a national securities exchange pursuant to Section 12(f) of the
Act or which become eligible for such trading pursuant to order of
the Commission, or (ii) which is also listed on a national
securities exchange.
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The Commission originally approved the Plan on a pilot basis on
June 26, 1990.\7\ The parties did not begin trading until July 12,
1993; accordingly, the pilot period commenced on July 12, 1993. The
Plan was most recently extended on December 21, 2004.\8\
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\7\ See Securities Exchange Act Release No. 28146, 55 FR 27917
(July 6, 1990).
\8\ See Securities Exchange Act Release No. 50855 (December 14,
2004), 69 FR 76499 (December 21, 2004).
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III. Description and Purpose of the Amendment
The complete text of the Plan, as amended, is attached as Exhibit
A. The following is a summary of the changes to the Plan prepared by
the Participants.
A. Section I.A. of the Plan provides for the list of Plan
Participants. Amendment No. 14 adds the Chicago Board Options Exchange
(``CBOE'') and the New York Stock Exchange (``NYSE'') as new
Participants to the Plan. In addition, CSE's name is modified to
reflect their new name, National Stock Exchange (``NSX''). Lastly, the
PCX address has been updated.
B. Amendment 14 corrects a cross-reference to Section XIV contained
in Section I.B. by replacing it with a reference to Section XIII
(relating to the development costs owed by new Participants).\9\
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\9\ Section XIII of the Plan specifies that a condition to
becoming a Participant is to pay a proportionate share of $439,530
which are the aggregate development costs previously paid by Plan
Participants to the Processor.
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C. Amendment 14 modifies Section III.Z. by removing the reference
to Nasdaq Participant and moving it to new Section III.AA. as a
separate definition.
D. Amendment 14 modifies Section IV.C.4. to reflect previously
approved language from Amendment 13A that was not incorporated into a
recently published version of the Plan.\10\
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\10\ See Securities Exchange Act Release No. 49711 (May 14,
2004), 69 FR 29339, (May 21, 2004) (``Amendment No. 13A Approval
Order'').
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E. Section VIII.C. provides for the Participant market identifiers
for quotation and transaction report information. Amendment No. 14 adds
``W'' as the identifier for the CBOE and ``N'' for NYSE. Further, the
reference to the CSE has been changed to NSX.
F. Amendment 14 modifies Section XI. to reflect that the Processor
will be available to accept and disseminate quotes and transaction
reports as early as 4 a.m. Eastern Time. Currently the Plan states that
quotations and transaction reports may be entered and disseminated as
of 8 a.m. Eastern Time. Amendment No. 14 modifies the opening hours to
4 a.m.\11\
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\11\ PCX/ArcaEx has submitted a proposal to the Commission to
begin quoting and trading at 4:00 a.m. Eastern Time. See Securities
Exchange Act Release No. 50756 (November 30, 2004), 69 FR 70489,
(December 6, 2004) (approving File No. SR-PCX-2004-83). To
disseminate quotes and trades as of 4:00 a.m., PCX/ArcaEx requested
that the Operating Committee and Nasdaq, as Plan Processor, modify
the operating hours of the Processor.
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G. Amendment 14 modifies Section 3.a.1. to Exhibit 1 to the Plan to
reflect previously approved language from Amendment 13A that was not
incorporated into the most recent version of the Plan.\12\
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\12\ See 13A Approval Order, supra note 10.
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According the Participants, Nasdaq as Processor will implement the
new Processor hours in its next release. CBOE and NYSE may commence
quoting and trading in Nasdaq-listed securities with the effectiveness
of Amendment No. 14, once they complete the necessary development and
implementation work.
IV. Date of Effectiveness of the Amendment
The Commission has determined that the changes set forth in
Amendment 14 are technical in nature, and thus have become effective
upon filing with the Commission.\13\ At any time within 60 days of the
filing of any such amendment, the Commission may summarily abrogate the
amendment and require that such amendment be refiled in accordance with
paragraph (b)(1) of Rule 11Aa3-2 under the Act \14\ and reviewed in
accordance with paragraph (c)(2) of Rule 11Aa3-2 under the Act,\15\ if
it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
the maintenance of fair and orderly markets, to remove impediments to,
and perfect mechanisms of, a national market system or otherwise in
furtherance of the purposes of the Act.\16\
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\13\ 17 CFR 240.11Aa3-2(c)(3)(iii).
\14\ 17 CFR 240.11Aa3-2(b)(1).
\15\ 17 CFR 240.11Aa3-2(c)(2).
\16\ See 17 CFR 240.11Aa3-2(c)(3)(iii).
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V. Solicitation of Comments
The Commission seeks general comments on Amendment No. 14.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the Plan
amendment is consistent with the Act. Comments may be submitted by any
of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-24-89 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609. All comment letters should refer to File No.
S7-24-89. This file number should be included on the subject line if e-
mail is used. To help the Commission process and review your comments
more efficiently, please use only one method. The Commission will post
all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments,
all written statements with respect to the Plan amendment that are
filed with the Commission, and all written communications relating to
the Plan amendment between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. The text of the Plan
is being
[[Page 12509]]
published as Exhibit A to this proposal. Copies of the proposal will
also be available for inspection and copying at the office of the
Secretary of the Committee, currently located at Pacific Exchange, Inc.
and Archipelago Exchange L.L.C., 100 South Wacker Drive, Suite 2000,
Chicago, IL 60606. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File No. S7-24-89
and should be submitted on or before April 4, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(27).
Margaret H. McFarland,
Deputy Secretary.
Exhibit A--Amendment No. 14; Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privilege Basis
The undersigned registered national securities association and
national securities exchanges (collectively referred to as the
``Participants''), have jointly developed and hereby enter into this
Nasdaq Unlisted Trading Privileges Plan (``Nasdaq UTP Plan'' or
``Plan'').
I. Participants
The Participants include the following:
A. Participants
1. American Stock Exchange LLC, 86 Trinity Place, New York, New York
10006.
2. Boston Stock Exchange, 100 Franklin Street, Boston, Massachusetts
02110.
3. Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605.
4. Chicago Board Options Exchange, Inc., 400 South LaSalle Street,
26th Floor, Chicago, Illinois 60605.
5. National Association of Securities, Dealers, Inc., 1735 K Street,
NW., Washington, DC 20006.
6. National Stock Exchange, 440 South LaSalle Street, 26th Floor,
Chicago, Illinois 60605.
7. New York Stock Exchange, Inc., 11 Wall Street, New York, New York
10005.
8. Pacific Exchange, Inc., 115 Sansome Street, San Francisco, CA
94104.
9. Philadelphia Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103.
B. Additional Participants
Any other national securities association or national securities
exchange, in whose market Eligible Securities become traded, may
become a Participant, provided that said organization executes a
copy of this Plan and pays its share of development costs as
specified in Section XIII.
II. Purpose of Plan
The purpose of this Plan is to provide for the collection,
consolidation and dissemination of Quotation Information and
Transaction Reports in Eligible Securities from the Participants in
a manner consistent with the Exchange Act.
It is expressly understood that each Participant shall be
responsible for the collection of Quotation Information and
Transaction Reports within its market and that nothing in this Plan
shall be deemed to govern or apply to the manner in which each
Participant does so.
III. Definitions
A. ``Current'' means, with respect to Transaction Reports or
Quotation Information, such Transaction Reports or Quotation
Information during the fifteen (15) minute period immediately
following the initial transmission thereof by the Processor.
B. ``Eligible Security'' means any Nasdaq National Market or
Nasdaq SmallCap security, as defined in NASD Rule 4200: (i) as to
which unlisted trading privileges have been granted to a national
securities exchange pursuant to Section 12(f) of the Exchange Act or
which become eligible for such trading pursuant to order of the
Securities and Exchange Commission; or (ii) which also is listed on
a national securities exchange.
C. ``Commission'' and ``SEC'' shall mean the U.S. Securities and
Exchange Commission.
D. ``Exchange Act'' means the Securities Exchange Act of 1934.
E. ``Market'' shall mean (i) when used with respect to Quotation
Information, the NASD in the case of a Nasdaq market maker or a
Nasdaq-registered electronic communications network/alternative
trading system (hereafter collectively referred to as ``Nasdaq
market participants'') acting in such capacity, or the Participant
on whose floor or through whose facilities the quotation was
disseminated; and (ii) when used with respect to Transaction
Reports, the Participant through whose facilities the transaction
took place or was reported, or the Participant to whose facilities
the order was sent for execution.
F. ``NASD'' means the National Association of Securities Dealers
Inc.
G. ``NASD Participant'' means an NASD member that is registered
as a market maker or an electronic communications network or
otherwise utilizes the facilities of the NASD pursuant to applicable
NASD rules.
H. ``NASD Transaction Reporting System'' means the System
provided for in the NASD's Transaction Reporting Plan filed with and
approved by the Commission pursuant to SEC Rule11Aa3-1, governing
the reporting of transactions in Nasdaq securities.
I. ``UTP Quote Data Feed'' means the service that provides
Subscribers with the National Best Bid and Offer quotations, size
and market center identifier, as well as the Best Bid and Offer
quotations, size and market center identifier from each individual
Participant in Eligible Securities.
J. ``Nasdaq Level 2 Service'' means the Nasdaq service that
provides Subscribers with query capability with respect to
quotations and sizes in securities included in the Nasdaq System,
best bid and asked quotations, and Transaction Reports.
K. ``Nasdaq Level 3 Service'' means the Nasdaq service that
provides Nasdaq market participants with input and query capability
with respect to quotations and sizes in securities included in the
Nasdaq System, best bid and asked quotations, and Transaction
Reports.
L. ``Nasdaq System'' means the automated quotation system
operated by Nasdaq.
M. ``UTP Trade Data Feed'' means the service that provides
Vendors and Subscribers with Transaction Reports.
N. ``Nasdaq Security'' or ``Nasdaq-listed Security'' means any
security listed on the Nasdaq National Market or Nasdaq SmallCap
Market.
O. ``News Service'' means a person that receives Transaction
Reports or Quotation Information provided by the Systems or provided
by a Vendor, on a Current basis, in connection with such person's
business of furnishing such information to newspapers, radio and
television stations and other news media, for publication at least
fifteen (15) minutes following the time when the information first
has been published by the Processor.
P. ``OTC Montage Data Feed `` means the data stream of
information that provides Vendors and Subscribers with quotations
and sizes from all Participants and Nasdaq market participants.
Q. ``Participant'' means a registered national securities
exchange or national securities association that is a signatory to
this Plan.
R. ``Plan'' means this Nasdaq UTP Plan, as from time to time
amended according to its provisions, governing the collection,
consolidation and dissemination of Quotation Information and
Transaction Reports in Eligible Securities.
S. ``Processor'' means the entity selected by the Participants
to perform the processing functions set forth in the Plan.
T. ``Quotation Information'' means all bids, offers, displayed
quotation sizes, the market center identifiers and, in the case of
NASD and Nasdaq, the NASD and Nasdaq market participant that entered
the quotation, withdrawals and other information pertaining to
quotations in Eligible Securities required to be collected and made
available to the Processor pursuant to this Plan.
U. ``Regulatory Halt'' means a trade suspension or halt called
for the purpose of dissemination of material news, as described at
Section X hereof or that is called for where there are regulatory
problems relating to an Eligible Security that should be clarified
before trading therein is permitted to continue, including a trading
halt for extraordinary market activity due to system misuse or
malfunction under Section X.E.1. of the Plan (``Extraordinary Market
Regulatory Halt'').
V. ``Subscriber'' means a person that receives Current Quotation
Information or Transaction Reports provided by the Processor or
provided by a Vendor, for its
[[Page 12510]]
own use or for distribution on a non-Current basis, other than in
connection with its activities as a Vendor.
W. ``Transaction Reports'' means reports required to be
collected and made available pursuant to this Plan containing the
stock symbol, price, and size of the transaction executed, the
Market in which the transaction was executed, and related
information, including a buy/sell/cross indicator and trade
modifiers, reflecting completed transactions in Eligible Securities.
X. ``Upon Effectiveness of the Plan'' means July 12, 1993, the
date on which the Participants commenced publication of Quotation
Information and Transaction Reports on Eligible Securities as
contemplated by this Plan.
Y. ``Vendor'' means a person that receives Current Quotation
Information or Transaction Reports provided by the Processor or
provided by a Vendor, in connection with such person's business of
distributing, publishing, or otherwise furnishing such information
on a Current basis to Subscribers, News Services or other Vendors.
Z. ``NQDS'' means the data stream of information that provides
Vendors and Subscribers with the best quotations and sizes from each
Nasdaq Participant.
AA. ``Nasdaq Participant'' means an entity that is registered as
a market maker or an electronic communications network in Nasdaq or
otherwise utilizes the facilities of The Nasdaq Stock Market
pursuant to applicable NASD rules but does not include an NASD
Participant as defined in Section III.G. of this Plan.
IV. Administration of Plan
A. Operating Committee: Composition
The Plan shall be administered by the Participants through an
operating committee (``Operating Committee''), which shall be
composed of one representative designated by each Participant. Each
Participant may designate an alternate representative or
representatives who shall be authorized to act on behalf of the
Participant in the absence of the designated representative. Within
the areas of its responsibilities and authority, decisions made or
actions taken by the Operating Committee, directly or by duly
delegated individuals, committees as may be established from time to
time, or others, shall be binding upon each Participant, without
prejudice to the rights of any Participant to seek redress from the
SEC pursuant to Rule 11Aa3-2 under the Exchange Act or in any other
appropriate forum.
An Electronic Communications Network, Alternative Trading
System, Broker-Dealer or other securities organization
(``Organization'') which is not a Participant, but has an actively
pending Form 1 Application on file with the Commission to become a
national securities exchange, will be permitted to appoint one
representative and one alternate representative to attend regularly
scheduled Operating Committee meetings in the capacity of an
observer/advisor. If the Organization's Form 1 petition is
withdrawn, returned, or is otherwise not actively pending with the
Commission for any reason, then the Organization will no longer be
eligible to be represented in the Operating Committee meetings. The
Operating Committee shall have the discretion, in limited instances,
to deviate from this policy if, as indicated by majority vote, the
Operating Committee agrees that circumstances so warrant.
Nothing in this section or elsewhere within the Plan shall
authorize any person or organization other than Participants and
their representatives to participate on the Operating Committee in
any manner other than as an advisor or observer, or in any Executive
Session of the Operating Committee.
B. Operating Committee: Authority
The Operating Committee shall be responsible for:
1. Overseeing the consolidation of Quotation Information and
Transaction Reports in Eligible Securities from the Participants for
dissemination to Vendors, Subscribers, News Services and others in
accordance with the provisions of the Plan;
2. Periodically evaluating the Processor;
3. Setting the level of fees to be paid by Vendors, Subscribers,
News Services or others for services relating to Quotation
Information or Transaction Reports in Eligible Securities, and
taking action in respect thereto in accordance with the provisions
of the Plan;
4. Determining matters involving the interpretation of the
provisions of the Plan;
5. Determining matters relating to the Plan's provisions for
cost allocation and revenue-sharing; and
6. Carrying out such other specific responsibilities as provided
under the Plan.
C. Operating Committee: Voting
Each Participant shall have one vote on all matters considered
by the Operating Committee.
1. The affirmative and unanimous vote of all Participants
entitled to vote shall be necessary to constitute the action of the
Operating Committee with respect to:
a. Amendments to the Plan;
b. Amendments to contracts between the Processor and Vendors,
Subscribers, News Services and others receiving Quotation
Information and Transaction Reports in Eligible Securities;
c. Replacement of the Processor, except for termination for
cause, which shall be governed by Section V(B) hereof;
d. Reductions in existing fees relating to Quotation Information
and Transaction Reports in Eligible Securities; and
e. Except as provided under Section IV(C)(3) hereof, requests
for system changes; and
f. All other matters not specifically addressed by the Plan.
2. With respect to the establishment of new fees or increases in
existing fees relating to Quotation Information and Transaction
Reports in Eligible Securities, the affirmative vote of two-thirds
of the Participants entitled to vote shall be necessary to
constitute the action of the Operating Committee.
3. The affirmative vote of a majority of the Participants
entitled to vote shall be necessary to constitute the action of the
Operating Committee with respect to:
a. Requests for system changes reasonably related to the
function of the Processor as defined under the Plan. All other
requests for system changes shall be governed by Section IV(C)(1)(e)
hereof.
b. Interpretive matters and decisions of the Operating Committee
arising under, or specifically required to be taken by, the
provisions of the Plan as written;
c. Interpretive matters arising under Exchange Act Rules 11Aa3-1
and 11Ac1-1; and
d. Denials of access (other than for breach of contract, which
shall be handled by the Processor),
4. It is expressly agreed and understood that neither this Plan
nor the Operating Committee shall have authority in any respect over
any Participant's proprietary systems. Nor shall the Plan or the
Operating Committee have any authority over the collection and
dissemination of quotation or transaction information in Eligible
Securities in any Participant's marketplace, or, in the case of the
NASD, from NASD Participants.
D. Operating Committee: Meetings
Regular meetings of the Operating Committee may be attended by
each Participant's designated representative and/or its alternate
representative(s), and may be attended by one or more other
representatives of the parties. Meetings shall be held at such times
and locations as shall from time to time be determined by the
Operating Committee.
Quorum: Any action requiring a vote only can be taken at a
meeting in which a quorum of all Participants is present. For
actions requiring a simple majority vote of all Participants, a
quorum of greater than 50% of all Participants entitled to vote must
be present at the meeting before such a vote may be taken. For
actions requiring a \2/3\ majority vote of all Participants, a
quorum of at least \2/3\ of all Participants entitled to vote must
be present at the meeting before such a vote may be taken. For
actions requiring a unanimous vote of all Participants, a quorum of
all Participants entitled to vote must be present at the meeting
before such a vote may be taken.
A Participant is considered present at a meeting only if a
Participant's designated representative or alternate
representative(s) is either in physical attendance at the meeting or
is participating by conference telephone, or other acceptable
electronic means.
Any action sought to be resolved at a meeting must be sent to
each Participant entitled to vote on such matter at least one week
prior to the meeting via electronic mail, regular U.S. or private
mail, or facsimile transmission, provided however that this
requirement may be waived by the vote of the percentage of the
Committee required to vote on any particular matter, under Section C
above.
Any action may be taken without a meeting if a consent in
writing, setting forth the action so taken, is sent to and signed by
all Participant representatives entitled to vote with respect to the
subject matter thereof. All the approvals evidencing the consent
shall be delivered to the Chairman of the Operating Committee to be
filed in the Operating
[[Page 12511]]
Committee records. The action taken shall be effective when the
minimum number of Participants entitled to vote have approved the
action, unless the consent specifies a different effective date.
The Chairman of the Operating Committee shall be elected
annually by and from among the Participants by a majority vote of
all Participants entitled to vote. The Chairman shall designate a
person to act as Secretary to record the minutes of each meeting.
The location of meetings shall be rotated among the locations of the
principal offices of the Participants, or such other locations as
may from time to time be determined by the Operating Committee.
Meetings may be held by conference telephone and action may be taken
without a meeting if the representatives of all Participants
entitled to vote consent thereto in writing or other means the
Operating Committee deems acceptable.
E. Advisory Committee
1. Composition
a. Each Plan Participant may designate three representatives to
participate in the Advisory Committee. The representatives shall
each be an employee of a member of that Participant, a professor or
other academic involved in the scholarly study of the securities
industry, or an expert in one or more areas of the securities
industry.
b. Each representative shall serve a one-year term on the
Advisory Committee.
2. Authority
The Advisory Committee shall have the opportunity to:
a. Meet twice yearly, each meeting to occur one day prior to a
meeting of the Operating Committee.
b. Discuss any matter related to the operation of the Plan.
c. Present written comments or inquiries to the Operating
Committee regarding matters related to the operation of the Plan.
d. Respond to written inquiries from the Operating Committee
seeking comment from the Advisory Committee on matters related to
the operation of the Plan.
V. Selection and Evaluation of the Processor
A. Generally
The Processor's performance of its functions under the Plan
shall be subject to review by the Operating Committee at least every
two years, or from time to time upon the request of any two
Participants but not more frequently than once each year. Based on
this review, the Operating Committee may choose to make a
recommendation to the Participants with respect to the continuing
operation of the Processor. The Operating Committee shall notify the
SEC of any recommendations the Operating Committee shall make
pursuant to the Operating Committee's review of the Processor and
shall supply the Commission with a copy of any reports that may be
prepared in connection therewith.
B. Termination of the Processor for Cause
If the Operating Committee determines that the Processor has
failed to perform its functions in a reasonably acceptable manner in
accordance with the provisions of the Plan or that its reimbursable
expenses have become excessive and are not justified on a cost
basis, the Processor may be terminated at such time as may be
determined by a majority vote of the Operating Committee.
C. Factors To Be Considered in Termination for Cause
Among the factors to be considered in evaluating whether the
Processor has performed its functions in a reasonably acceptable
manner in accordance with the provisions of the Plan shall be the
reasonableness of its response to requests from Participants for
technological changes or enhancements pursuant to Section IV(C)(3)
hereof. The reasonableness of the Processor's response to such
requests shall be evaluated by the Operating Committee in terms of
the cost to the Processor of purchasing the same service from a
third party and integrating such service into the Processor's
existing systems and operations as well as the extent to which the
requested change would adversely impact the then current technical
(as opposed to business or competitive) operations of the Processor.
D. Processor's Right to Appeal Termination for Cause
The Processor shall have the right to appeal to the SEC a
determination of the Operating Committee terminating the Processor
for cause and no action shall become final until the SEC has ruled
on the matter and all legal appeals of right therefrom have been
exhausted.
E. Process for Selecting New Processor
At any time following effectiveness of the Plan, but no later
than upon the termination of the Processor, whether for cause
pursuant to Section IV(C)(1)(c) or V(B) of the Plan or upon the
Processor's resignation, the Operating Committee shall establish
procedures for selecting a new Processor (the ``Selection
Procedures''). The Operating Committee, as part of the process of
establishing Selection Procedures, may solicit and consider the
timely comment of any entity affected by the operation of this Plan.
The Selection Procedures shall be established by a two-thirds
majority vote of the Plan Participants, and shall set forth, at a
minimum:
1. The entity that will:
(a) Draft the Operating Committee's request for proposal for
bids on a new processor;
(b) Assist the Operating Committee in evaluating bids for the
new processor; and
(c) Otherwise provide assistance and guidance to the Operating
Committee in the selection process.
2. The minimum technical and operational requirements to be
fulfilled by the Processor;
3. The criteria to be considered in selecting the Processor; and
4. The entities (other than Plan Participants) that are eligible
to comment on the selection of the Processor.
Nothing in this provision shall be interpreted as limiting
Participants' rights under Section IV or Section V of the Plan or
other Commission order.
VI. Functions of the Processor
A. Generally
The Processor shall collect from the Participants, and
consolidate and disseminate to Vendors, Subscribers and News
Services, Quotation Information and Transaction Reports in Eligible
Securities in a manner designed to assure the prompt, accurate and
reliable collection, processing and dissemination of information
with respect to all Eligible Securities in a fair and non-
discriminatory manner. The Processor shall commence operations upon
the Processor's notification to the Participants that it is ready
and able to commence such operations.
B. Collection and Consolidation of Information
For as long as Nasdaq is the Processor, the Processor shall be
capable of receiving Quotation Information and Transaction Reports
in Eligible Securities from Participants by the Plan-approved,
Processor sponsored interface, and shall consolidate and disseminate
such information via the UTP Quote Data Feed, the UTP Trade Data
Feed, and the OTC Montage Data Feed to Vendors, Subscribers and News
Services. For so long as Nasdaq is not registered as a national
securities exchange and for so long as Nasdaq is the Processor, the
Processor shall also collect, consolidate, and disseminate the
quotation information contained in NQDS. For so long as Nasdaq is
not registered as a national securities exchange and after Nasdaq is
no longer the Processor for other SIP datafeeds, either Nasdaq or a
third party will act as the Processor to collect, consolidate, and
disseminate the quotation information contained in NQDS.
C. Dissemination of Information
The Processor shall disseminate consolidated Quotation
Information and Transaction Reports in Eligible Securities via the
UTP Quote Data Feed, the UTP Trade Data Feed, and the OTC Montage
Data Feed to authorized Vendors, Subscribers and News Services in a
fair and non-discriminatory manner. The Processor shall specifically
be permitted to enter into agreements with Vendors, Subscribers and
News Services for the dissemination of quotation or transaction
information on Eligible Securities to foreign (non-U.S.)
marketplaces or in foreign countries.
The Processor shall, in such instance, disseminate consolidated
quotation or transaction information on Eligible Securities from all
Participants.
Nothing herein shall be construed so as to prohibit or restrict
in any way the right of any Participant to distribute quotation,
transaction or other information with respect to Eligible Securities
quoted on or traded in its marketplace to a marketplace outside the
United States solely for the purpose of supporting an intermarket
linkage, or to distribute information within its own marketplace
concerning Eligible Securities in accordance with its own format. If
a Participant requests, the Processor shall make information about
Eligible Securities in the Participant's marketplace available to a
[[Page 12512]]
foreign marketplace on behalf of the requesting Participant, in
which event the cost shall be borne by that Participant.
1. Best Bid and Offer
The Processor shall disseminate on the UTP Quote Data Feed the
best bid and offer information supplied by each Participant,
including the Nasdaq market participants, and shall also calculate
and disseminate on the UTP Quote Data Feed a national best bid and
asked quotation with size based upon Quotation Information for
Eligible Securities received from Participants. The Processor shall
not calculate the best bid and offer for any individual Participant,
including the NASD.
The Participant responsible for each side of the best bid and
asked quotation making up the national best bid and offer shall be
identified by an appropriate symbol. If the quotations of more than
one Participant shall be the same best price, the largest displayed
size among those shall be deemed to be the best. If the quotations
of more than one Participant are the same best price and best
displayed size, the earliest among those measured by the time
reported shall be deemed to be the best. A reduction of only bid
size and/or ask size will not change the time priority of a
Participant's quote for the purposes of determining time reported,
whereas an increase of the bid size and/or ask size will result in a
new time reported. The consolidated size shall be the size of the
Participant that is at the best.
If the best bid/best offer results in a locked or crossed
quotation, the Processor shall forward that locked or crossed quote
on the appropriate output lines (i.e., a crossed quote of bid 12,
ask 11.87 shall be disseminated). The Processor shall normally cease
the calculation of the best bid/best offer after 6:30 p.m., Eastern
Time.
2. Eligible Securities
a. Number of Eligible Securities--If the Commission by order
expands the number of Eligible Securities beyond 1,000, the number
of Eligible Securities that Participants may trade shall be phased
in (added) according to the schedule set out below:
(i) At the end of the first calendar quarter following the
Commission's order expanding the number of Eligible Securities
beyond 1,000 but in no case before September 30, 2001, Participants
may commence trading 500 additional securities;
(ii) At the end of each of the four calendar quarters following
the date established under provision VI.C(2)(a)(i) of the Plan,
Participants may commence trading an additional 500 securities, and
at the end of the fifth calendar quarter following the date
established under provision VI.C(2)(a)(i) of the Plan, Participants
shall be permitted to trade all Eligible Securities.
(iii) In no case shall the number of Eligible Securities exceed
the number of securities that the Commission deems are eligible for
trading pursuant to this Plan.
(iv) After each of the aforementioned phase in periods (i.e.,
calendar quarters), the Processor shall evaluate its performance to
determine whether it is prudent, in light of system capacity and any
other operational factors, to continue to add additional securities
pursuant to the phase in schedule. If the Processor determines, in
light of system capacity and any other operational factors, that it
is not prudent to continue to expand the number of Eligible
Securities, the Processor upon notice to the Participants
immediately may suspend the phase-in schedule and delay the
expansion of the number of Eligible Securities that may be traded
under the Plan. The Processor shall commence adding securities
pursuant to a revised phase-in schedule, when the Processor
determines it is prudent to do so, in light of system capacity and
any other operational factors.
(v) This provision shall not apply to The Nasdaq Stock Market,
Inc., or Nasdaq market participants acting in such capacity, nor
shall it apply to any Participant that does not engage in auto-
quoting, as described in paragraph VI.C.(2)(b) below.
b. Limitation on Auto-Quoting--Except as provided in sub-
paragraph VI.C(2)(c) of this Plan, Participants shall be prohibited
from the practice of ``auto-quoting.'' ``Auto-quoting'' means the
practice of tracking, by automated means, the changes to the best
bid or best ask quotation and responding by generating another quote
change to keep that Participant away from the best bid or ask
quotation, but for purposes of this Plan, shall not include:
(i) An update that is in response to an execution in the
security by that Participant;
(ii) An update that requires a physical entry;
(iii) An update that is to reflect the receipt, execution, or
cancellation of a customer limit order; or
(iv) The practice of automatically generating quote changes at a
rate of less than 35% of all price changes to the national best bid
or ask quotation. The Processor shall calculate this rate using
quoting activity during the preceding calendar month.
c. Applicability of Auto-Quoting Limitation--The Limitation on
Auto-Quoting contained in subparagraph VI.C(2)(b) of this Plan shall
only apply if the Processor deems it necessary to maintain adequate
capacity for the normal and efficient operation of the Processor and
the Processor provides at least 30 calendar days notice to the
Participants and the basis thereof of such determination. The
Processor shall lift the limitation on auto-quoting when the
Processor determines it is prudent to do so, in light of system
capacity and any other operational factors. Additionally, the
Limitation on Auto-Quoting set forth in subparagraph VI.C(2)(b) of
this Plan will not apply to a Participant whose aggregated quoting
activity in eligible Nasdaq securities does not exceed 1% of the
total quotation traffic across all Nasdaq securities by all Nasdaq
market participants and Exchange Participants. The Processor shall
calculate this rate using quoting activity during the preceding
calendar month.
d. Obligations of Participants Regarding Capacity--Each
Participant shall exercise due diligence to promote quotation
generation practices that mitigate quotation traffic so as to ensure
prudential excess capacity within the Processor. The Operating
Committee shall periodically review the performance of Participants
and take such action as necessary to maintain prudential excess
capacity.
e. Procedures for Ensuring Acceptable Quote Generation
Practices--The following procedures shall apply if, in accordance
with Section VI.C.2(c) of the Plan, the Processor determines that a
capacity concern exists.
(i) On a monthly basis, each Participant shall provide the
Processor with a good faith estimate of the Participant's previous
month's daily average number of quote updates to permit the
Processor to determine compliance with the auto-quoting limitation
referenced in Section VI.C.2.(b) of the Plan.
(ii) If the Processor determines, from the Participant's data or
otherwise, that the Participant has not complied with the
limitations of Section VI.C.2.(b), the Processor shall give the
Participant written notice of such condition. The Participant shall
have 30 calendar days after receipt of the written notice to remedy
the condition.
(iii) If, after the aforementioned 30-day period has expired,
the condition has not been remedied to the reasonable satisfaction
of the Processor, then the Processor shall submit to the Operating
Committee a written request for relief together with supporting
documentation evidencing the alleged condition (i.e., failure to
comply with the limitations of Section VI.C.2.(b)) and quantifying
the impact of the violation on overall capacity of the Processor.
The Processor's request for relief shall be limited to such remedial
action (including but not limited to the termination of service to
the subject Participant) as is necessary to modify the subject
Participant's quote generation practices on a prospective basis, for
such period as is necessary to resolve the condition that gave rise
to the Processor's request for relief. The Participant shall have 15
calendar days to respond in writing to the Processor's request for
relief.
(iv) The Operating Committee, following written notice to the
Participant and the Processor, shall conduct a hearing within five
(5) business days after expiration of the 15-day response period to
determine whether to grant or deny the Processor's claim for
remedial action. At the hearing, the Operating Committee may
consider, among other information, the request of the Processor, the
response (if any) of the Participant and any other evidence (written
or oral) that is presented at the hearing. At the conclusion of the
hearing, the Operating Committee shall grant or deny the Processor's
request. An affirmative vote of two-thirds of the Operating
Committee members entitled to vote (excluding the subject
Participant) shall be required for any decision of the Operating
Committee. The decision of the Operating Committee shall be final
and therefore reviewable by the Commission; provided, however, that
any decision of the Operating Committee shall not become effective
until five business days after the date of the decision.
f. Limitation on Applicability of Rule--The phase-in schedule
contained in of VI.C(2)(a) and the Limitation on Auto-Quoting
contained in VI.C(2)(c) shall not apply:
(i) To any Participant upon the designation and the operation of
a new Processor; and
(ii) To a Participant for the number of securities that the
Participant quoted as of
[[Page 12513]]
May 1, 2001; provided, however the exemption contained herein shall
expire a year from the end-date of the phase-in schedule contained
in VI.C(2)(a).
3. Quotation Data Streams
The Processor shall disseminate on the UTP Quote Data Feed a
data stream of all Quotation Information regarding Eligible
Securities received from Participants. Each quotation shall be
designated with a symbol identifying the Participant from which the
quotation emanates. Quotation Information from individual NASD
Participants will not be disseminated on the UTP Quote Data Feed.
The Processor shall separately distribute on the OTC Montage Data
Feed the Quotation Information regarding Eligible Securities from
all NASD Participants from which quotations emanate. The Processor
shall separately distribute NQDS for so long as Nasdaq is not
registered as a national securities exchange and for so long as
Nasdaq is the Processor. For so long as Nasdaq is not registered as
a national securities exchange and after Nasdaq is no longer the
Processor for other SIP datafeeds, either Nasdaq or a third party
will act as the Processor to collect, consolidate, and disseminate
the quotation information contained in NQDS.
4. Transaction Reports
The Processor shall disseminate on the UTP Trade Data Feed a
data stream of all Transaction Reports in Eligible Securities
received from Participants. Each transaction report shall be
designated with a symbol identifying the Participant in whose Market
the transaction took place.
D. Closing Reports
At the conclusion of each trading day, the Processor shall
disseminate a ``closing price'' for each Eligible Security. Such
``closing price'' shall be the price of the last Transaction Report
in such security received prior to dissemination. The Processor
shall also tabulate and disseminate at the conclusion of each
trading day the aggregate volume reflected by all Transaction
Reports in Eligible Securities reported by the Participants.
E. Statistics
The Processor shall maintain quarterly, semi-annual and annual
transaction and volume statistical counts. The Processor shall, at
cost to the user Participant(s), make such statistics available in a
form agreed upon by the Operating Committee, such as a secure
website.
VII. Administrative Functions of the Processor
Subject to the general direction of the Operating Committee, the
Processor shall be responsible for carrying out all administrative
functions necessary to the operation and maintenance of the
consolidated information collection and dissemination system
provided for in this Plan, including, but not limited to, record
keeping, billing, contract administration, and the preparation of
financial reports.
VIII. Transmission of Information to Processor by Participants
A. Quotation Information
Each Participant shall, during the time it is open for trading
be responsible promptly to collect and transmit to the Processor
accurate Quotation information in Eligible Securities through any
means prescribed herein.
Quotation Information shall include:
1. Identification of the Eligible Security, using the Nasdaq
Symbol;
2. The price bid and offered, together with size;
3. The Nasdaq market participant or Participant from which the
quotation emanates;
4. Identification of quotations that are not firm; and
5. Through appropriate codes and messages, withdrawals and
similar matters.
B. Transaction Reports
Each Participant shall, during the time it is open for trading,
be responsible promptly to collect and transmit to the Processor
Transaction Reports in Eligible Securities executed in its Market by
means prescribed herein. With respect to orders sent by one
Participant Market to another Participant Market for execution, each
Participant shall adopt procedures governing the reporting of
transactions in Eligible Securities specifying that the transaction
will be reported by the Participant whose member sold the security.
This provision shall apply only to transactions between Plan
Participants.
Transaction Reports shall include:
1. Identification of the Eligible Security, using the Nasdaq
Symbol;
2. The number of shares in the transaction;
3. The price at which the shares were purchased or sold;
4. The buy/sell/cross indicator;
5. The Market of execution; and,
6. Through appropriate codes and messages, late or out-of-
sequence trades, corrections and similar matters.
All such Transaction Reports shall be transmitted to the
Processor within 90 seconds after the time of execution of the
transaction. Transaction Reports transmitted beyond the 90-second
period shall be designated as ``late'' by the appropriate code or
message.
The following types of transactions are not required to be
reported to the Processor pursuant to the Plan:
1. Transactions that are part of a primary distribution by an
issuer or of a registered secondary distribution or of an
unregistered secondary distribution;
2. Transactions made in reliance on Section 4(2) of the
Securities Act of 1933;
3. Transactions in which the buyer and the seller have agreed to
trade at a price unrelated to the Current Market for the security,
e.g., to enable the seller to make a gift;
4. Odd-lot transactions;
5. The acquisition of securities by a broker-dealer as principal
in anticipation of making an immediate exchange distribution or
exchange offering on an exchange;
6. Purchases of securities pursuant to a tender offer; and
7. Purchases or sales of securities effected upon the exercise
of an option pursuant to the terms thereof or the exercise of any
other right to acquire securities at a pre-established consideration
unrelated to the Current Market.
C. Symbols for Market Identification for Quotation Information and
Transaction Reports
The following symbols shall be used to denote the marketplaces:
------------------------------------------------------------------------
Code Participant
------------------------------------------------------------------------
A.............................. American Stock Exchange.
B.............................. Boston Stock Exchange.
W.............................. Chicago Board Options Exchange, Inc.
C.............................. Cincinnati Stock Exchange.
M.............................. Chicago Stock Exchange.
D.............................. NASD.
Q.............................. Nasdaq.
C.............................. National Stock Exchange.
N.............................. New York Stock Exchange, Inc.
P.............................. Pacific Exchange.
X.............................. Philadelphia Stock Exchange.
------------------------------------------------------------------------
D. Whenever a Participant determines that a level of trading
activity or other unusual market conditions prevent it from
collecting and transmitting Quotation Information or Transaction
Reports to the Processor, or where a trading halt or suspension in
an Eligible Security is in effect in its Market, the Participant
shall promptly notify the Processor of such condition or event and
shall resume collecting and transmitting Quotation Information and
Transaction Reports to it as soon as the condition or event is
terminated. In the event of a system malfunction resulting in the
inability of a Participant or its members to transmit Quotation
Information or Transaction Reports to the Processor, the Participant
shall promptly notify the Processor of such event or condition. Upon
receiving such notification, the Processor shall take appropriate
action, including either closing the quotation or purging the system
of the affected quotations.
IX. Market Access
A. Each Participant shall permit each Nasdaq market participant,
acting in its capacity as such, direct telephone access to the
specialist, trading post, and supervisory center in each Eligible
Security in which such Nasdaq market participant is registered as a
market maker or electronic communications network/alternative
trading system with Nasdaq. Such access shall include appropriate
procedures or requirements by each Participant or employee to assure
the timely response to communications received through telephonic
access. No Participant shall permit the imposition of any access or
execution fee, or any other fee or charge, with respect to
transactions in Eligible Securities effected with Nasdaq market
participants which are communicated to the floor by telephone
pursuant to the provisions of this Plan. A Participant shall be free
to charge for other types of access to its floor or facilities.
B. The NASD shall assure that each Participant, and its members
shall have
[[Page 12514]]
direct telephone access to the trading desk of each Nasdaq market
participant in each Eligible Security in which the Participant
displays quotations, and to the Nasdaq Supervisory Center. Such
access shall include appropriate procedures or requirements to
assure the timely response of each Nasdaq market participant to
communications received through telephone access. Neither the NASD
nor any Nasdaq market participant shall impose any access or
execution fee, or any other fee or charge, with respect to
transactions in Eligible Securities effected with a member of a
Participant which are communicated by telephone pursuant to the
provisions of this Plan.
X. Regulatory Halts
A. For purposes of this Section X, ``Participant'' shall include
the Nasdaq Stock Market. Whenever, in the exercise of its regulatory
functions, the Listing Market for an Eligible Security determines
that a Regulatory Halt is appropriate pursuant to Section III.T, the
Listing Market will notify all other Participants pursuant to
Section X.E and all other Participants shall also halt or suspend
trading in that security until notification that the halt or
suspension is no longer in effect. The Listing Market shall
immediately notify the Processor of such Regulatory Halt as well as
notice of the lifting of a Regulatory Halt. The Processor, in turn,
shall disseminate to Participants notice of the Regulatory Halt (as
well as notice of the lifting of a regulatory halt) through the UTP
Quote Data Feed. This notice shall serve as official notice of a
regulatory halt for purposes of the Plan only, and shall not
substitute or otherwise supplant notice that a Participant may
recognize or require under its own rules. Nothing in this provision
shall be read so as to supplant or be inconsistent with a
Participant's own rules on trade halts, which rules apply to the
Participant's own members. The Processor will reject any quotation
information or transaction reports received from any Participant on
an Eligible Security that has a Regulatory Halt in effect.
B. Whenever the Listing Market determines that an adequate
publication or dissemination of information has occurred so as to
permit the termination of the Regulatory Halt then in effect, the
Listing Market shall promptly notify the Processor and each of the
other Participants that conducts trading in such security pursuant
to Section X.F. Except in extraordinary circumstances, adequate
publication or dissemination shall be presumed by the Listing Market
to have occurred upon the expiration of one hour after initial
publication in a national news dissemination service of the
information that gave rise to the Regulatory Halt.
C. Except in the case of a Regulatory Halt, the Processor shall
not cease the dissemination of quotation or transaction information
regarding any Eligible Security. In particular, it shall not cease
dissemination of such information because of a delayed opening,
imbalance of orders or other market-related problems involving such
security. During a regulatory halt, the Processor shall collect and
disseminate Transaction Information but shall cease collection and
dissemination of all Quotation Information.
D. For purposes of this Section X, ``Listing Market'' for an
Eligible Security means the Participant's Market on which the
Eligible Security is listed. If an Eligible Security is dually
listed, Listing Market shall mean the Participant's Market on which
the Eligible Security is listed that also has the highest number of
the average of the reported transactions and reported share volume
for the preceding 12-month period. The Listing Market for dually-
listed Eligible Securities shall be determined at the beginning of
each calendar quarter.
E. For purposes of coordinating trading halts in Eligible
Securities, all Participants are required to utilize the national
market system communication media (``Hoot-n-Holler'') to verbally
provide real-time information to all Participants. Each Participant
shall be required to continuously monitor the Hoot-n-Holler system
during market hours, and the failure of a Participant to do so at
any time shall not prevent the Listing Market from initiating a
Regulatory Halt in accordance with the procedures specified herein.
1. The following procedures shall be followed when one or more
Participants experiences extraordinary market activity in an
Eligible Security that is believed to be caused by the misuse or
malfunction of systems operated by or linked to one or more
Participants.
a. The Participant(s) experiencing the extraordinary market
activity or any Participant that becomes aware of extraordinary
market activity will immediately use best efforts to notify all
Participants of the extraordinary market activity utilizing the
Hoot-n-Holler system.
b. The Listing Market will use best efforts to determine whether
there is material news regarding the Eligible Security. If the
Listing Market determines that there is non-disclosed material news,
it will immediately call a Regulatory Halt pursuant to Section
X.E.2.
c. Each Participant(s) will use best efforts to determine
whether one of its systems, or the system of a direct or indirect
participant in its market, is responsible for the extraordinary
market activity.
d. If a Participant determines the potential source of
extraordinary market activity pursuant to Section X.1.c., the
Participant will use best efforts to determine whether removing the
quotations of one or more direct or indirect market participants or
barring one or more direct or indirect market participants from
entering orders will resolve the extraordinary market activity.
Accordingly, the Participant will prevent the quotations from one or
more direct or indirect market participants in the affected Eligible
Securities from being transmitted to the Processor.
e. If the procedures described in Section X.E.1.a.-d. do not
rectify the situation, the Participant(s) experiencing extraordinary
market activity will cease transmitting all quotations in the
affected Eligible Securities to the Processor.
f. If the procedures described in Section X.E.1.a-e do not
rectify the situation within five minutes of the first notification
through the Hoot-n-Holler system, or if Participants agree to call a
halt sooner through unanimous approval among those Participants
actively trading impacted Eligible Securities, the Listing Market
may determine based on the facts and circumstances, including
available input from Participants, to declare an Extraordinary
Market Regulatory Halt in the affected Eligible Securities.
Simultaneously with the notification of the Processor to suspend the
dissemination of quotations across all Participants, the Listing
Market must verbally notify all Participants of the trading halt
utilizing the Hoot-n-Holler system.
g. Absent any evidence of system misuse or malfunction, best
efforts will be used to ensure that trading is not halted across all
Participants.
2. If the Listing Market declares a Regulatory Halt in
circumstances other than pursuant to Section X.E.1.f., the Listing
Market must, simultaneously with the notification of the Processor
to suspend the dissemination of quotations across all Participants,
verbally notify all Participants of the trading halt utilizing the
Hoot-n-Holler system.
F. If the Listing Market declares a Regulatory Halt, trading
will resume according to the following procedures:
1. Within 15 minutes of the declaration of the halt, all
Participants will make best efforts to indicate via the Hoot-n-
Holler their intentions with respect to canceling or modifying
transactions.
2. All Participants will disseminate to their members
information regarding the canceled or modified transactions as
promptly as possible, and in any event prior to the resumption of
trading.
3. After all Participants have met the requirements of Section
X.F.1-2, the Listing Market will notify the Participants utilizing
the Hoot-n-Holler and the Processor when trading may resume. Upon
receiving this information, Participants may commence trading
pursuant to Section X.A.
XI. Hours of Operation
A. Quotation Information may be entered by Participants as to
all Eligible Securities in which they make a market between 9:30
a.m. and 4 p.m. Eastern Time (``ET'') on all days the Processor is
in operation. Transaction Reports shall be entered between 9:30 a.m.
and 4:01:30 p.m. ET by Participants as to all Eligible Securities in
which they execute transactions between 9:30 a.m. and 4 p.m. ET on
all days the Processor is in operation.
B. Participants that execute transactions in Eligible Securities
outside the hours of 9:30 a.m. ET and 4 p.m., ET, shall be required
to report such transactions as follows:
(i) Transactions in Eligible Securities executed between 4 a.m.
and 9:29:59 a.m. ET and between 4:00:01 and 6:30 p.m. ET, shall be
designated as ``.T'' trades to denote their execution outside normal
market hours;
(ii) Transactions in Eligible Securities executed after 6:30
p.m. and before 12 a.m. (midnight) shall be reported to the
Processor between the hours of 4 a.m. and 6:30 p.m. ET on the next
business day (T+1), and shall be designated ``as/of'' trades to
denote their execution on a prior day, and be accompanied by the
time of execution;
[[Page 12515]]
(iii) Transactions in Eligible Securities executed between 12
a.m. (midnight) and 4 a.m. ET shall be transmitted to the Processor
between 4 a.m. and 9:30 a.m. ET, on trade date, shall be designated
as ``.T'' trades to denote their execution outside normal market
hours, and shall be accompanied by the time of execution;
(iv) Transactions reported pursuant to this provision of the
Plan shall be included in the calculation of total trade volume for
purposes of determining net distributable operating revenue, but
shall not be included in the calculation of the daily high, low, or
last sale.
C. Late trades shall be reported in accordance with the rules of
the Participant in whose Market the transaction occurred and can be
reported between the hours of 4 a.m. and 6:30 p.m.
D. The Processor shall collect, process and disseminate
Quotation Information in Eligible Securities at other times between
4 a.m. and 9:30 a.m. ET, and after 4 p.m. ET, when any Participant
or Nasdaq market participant is open for trading, until 6:30 p.m. ET
(the ``Additional Period''); provided, however, that the best bid
and offer quotation will not be disseminated before 4 a.m. or after
6:30 p.m. ET. Participants that enter Quotation Information or
submit Transaction Reports to the Processor during the Additional
Period shall do so for all Eligible Securities in which they enter
quotations.
XII. Undertaking by All Participants
The filing with and approval by the Commission of this Plan
shall obligate each Participant to enforce compliance by its members
with the provisions thereof. In all other respects not inconsistent
herewith, the rules of each Participant shall apply to the actions
of its members in effecting, reporting, honoring and settling
transactions executed through its facilities, and the entry,
maintenance and firmness of quotations to ensure that such occurs in
a manner consistent with just and equitable principles of trade.
XIII. Financial Matters
A. Development Costs
Any Participant becoming a signatory to this Plan after June 26,
1990, shall, as a condition to becoming a Participant, pay to the
other Plan Participants a proportionate share of the aggregate
development costs previously paid by Plan Participants to the
Processor, which aggregate development costs totaled $439,530, with
the result that each Participant's share of all development costs is
the same.
Each Participant shall bear the cost of implementation of any
technical enhancements to the Nasdaq system made at its request and
solely for its use, subject to reapportionment should any other
Participant subsequently make use of the enhancement, or the
development thereof.
B. Cost Allocation and Revenue Sharing
The provisions governing cost allocation and revenue sharing
among the Participants are set forth in Exhibit 1 to the Plan.
C. Maintenance of Financial Records
The Processor shall maintain records of revenues generated and
development and operating expenditures incurred in connection with
the Plan. In addition, the Processor shall provide the Participants
with: (a) a statement of financial and operational condition on a
quarterly basis; and (b) an audited statement of financial and
operational condition on an annual basis.
XIV. Indemnification
Each Participant agrees, severally and not jointly, to indemnify
and hold harmless each other Participant, Nasdaq, and each of its
directors, officers, employees and agents (including the Operating
Committee and its employees and agents) from and against any and all
loss, liability, claim, damage and expense whatsoever incurred or
threatened against such persons as a result of any Transaction
Reports, Quotation Information or other information reported to the
Processor by such Participant and disseminated by the Processor to
Vendors. This indemnity agreement shall be in addition to any
liability that the indemnifying Participant may otherwise have.
Promptly after receipt by an indemnified Participant of notice
of the commencement of any action, such indemnified Participant
will, if a claim in respect thereof is to be made against an
indemnifying Participant, notify the indemnifying Participant in
writing of the commencement thereof; but the omission to so notify
the indemnifying Participant will not relieve the indemnifying
Participant from any liability which it may have to any indemnified
Participant. In case any such action is brought against any
indemnified Participant and it promptly notifies an indemnifying
Participant of the commencement thereof, the indemnifying
Participant will be entitled to participate in, and, to the extent
that it may wish, jointly with any other indemnifying Participant
similarly notified, to assume and control the defense thereof with
counsel chosen by it. After notice from the indemnifying Participant
of its election to assume the defense thereof, the indemnifying
Participant will not be liable to such indemnified Participant for
any legal or other expenses subsequently incurred by such
indemnified Participant in connection with the defense thereof but
the indemnified Participant may, at its own expense, participate in
such defense by counsel chosen by it without, however, impairing the
indemnifying Participant's control of the defense. The indemnifying
Participant may negotiate a compromise or settlement of any such
action, provided that such compromise or settlement does not require
a contribution by the indemnified Participant.
XV. Withdrawal
Any Participant may withdraw from the Plan at any time on not
less than 30 days prior written notice to each of the other
Participants. Any Participant withdrawing from the Plan shall remain
liable for, and shall pay upon demand, any fees for equipment or
services being provided to such Participant pursuant to the contract
executed by it or an agreement or schedule of fees covering such
then in effect.
A withdrawing Participant shall also remain liable for its
proportionate share, without any right of recovery, of
administrative and operating expenses, including start-up costs and
other sums for which it may be responsible pursuant to Section XIV
hereof. Except as aforesaid, a withdrawing Participant shall have no
further obligation under the Plan or to any of the other
Participants with respect to the period following the effectiveness
of its withdrawal.
XVI. Modifications to Plan
The Plan may be modified from time to time when authorized by
the agreement of all of the Participants, subject to the approval of
the SEC.
XVII. Applicability of Securities Exchange Act of 1934
The rights and obligations of the Participants and of Vendors,
News Services, Subscribers and other persons contracting with
Participant in respect of the matters covered by the Plan shall at
all times be subject to any applicable provisions of the Act, as
amended, and any rules and regulations promulgated thereunder.
XVIII. Operational Issues
A. Each Exchange Participant shall be responsible for collecting
and validating quotes and last sale reports within their own system
prior to transmitting this data to the Processor.
B. Each Exchange Participant may utilize a dedicated Participant
line into the Processor to transmit trade and quote information in
Eligible Securities to the Processor. The Processor shall accept
from Exchange Participants input for only those issues that are
deemed Eligible Securities.
C. The Processor shall consolidate trade and quote information
from each Participant and disseminate this information on the Nasdaq
existing vendor lines.
D. The Processor shall perform gross validation processing for
quotes and last sale messages in addition to the collection and
dissemination functions, as follows:
1. Basic Message Validation
(a) The Processor may validate format for each type of message,
and reject non-conforming messages.
(b) Input must be for an Eligible Security.
2. Logging Function--The Processor shall return all Participant
input messages that do not pass the validation checks (described
above) to the inputting Participant, on the entering Participant
line, with an appropriate reject notation. For all accepted
Participant input messages (i.e., those that pass the validation
check), the information shall be retained in the Processor system.
XIX. Headings
The section and other headings contained in this Plan are for
reference purposes only and shall not be deemed to be a part of this
Plan or to affect the meaning or interpretation of any provisions of
this Plan.
XX. Counterparts
This Plan may be executed by the Participants in any number of
counterparts, no one of which need contain the signature of all
Participants. As many such counterparts as shall together contain
all
[[Page 12516]]
such signatures shall constitute one and the same instrument.
XXI. Depth of Book Display
The Operating Committee has determined that the entity that
succeeds Nasdaq as the Processor should have the ability to collect,
consolidate, and disseminate quotations at multiple price levels
beyond the best bid and best offer from any Participant that
voluntarily chooses to submit such quotations while determining that
no Participant shall be required to submit such information. The
Operating Committee has further determined that the costs of
developing, collecting, processing, and disseminating such depth of
book data shall be borne exclusively by those Participants that
choose to submit this information to the Processor, by whatever
allocation those Participants may choose among themselves. The
Operating Committee has determined further that the primary purpose
of the Processor is the collection, processing and dissemination of
best bid, best offer and last sale information (``core data''), and
as such, the Participants will adopt procedures to ensure that such
functionality in no way hinders the collecting, processing and
dissemination of this core data.
Therefore, implementing the depth of book display functionality
will require a plan amendment that addresses all pertinent issues,
including:
(1) Procedures for ensuring that the fully-loaded cost of the
collection, processing, and dissemination of depth-of-book
information will be tracked and invoiced directly to those Plan
Participants that voluntarily choose to send that data, voluntarily,
to the Processor, allocating in whatever manner those Participants
might agree; and
(2) Necessary safeguards the Processor will take to ensure that
its processing of depth-of-book data will not impede or hamper, in
any way, its core Processor functionality of collecting,
consolidating, and disseminating National Best Bid and Offer data,
exchange best bid and offer data, and consolidated last sale data.
Upon approval of a Plan amendment implementing depth of book
display, this article of the Plan shall be automatically deleted.
IN WITNESS WHEREOF, this Plan has been executed as of the ----
day of ----, 200--, by each of the Signatories hereto.
American Stock Exchange LLC
By:-------------------------------------------------------------------
Boston Stock Exchange, Inc.
By:-------------------------------------------------------------------
Chicago Stock Exchange, Inc.
By:-------------------------------------------------------------------
Chicago Board Options Exchange, Inc.
By:-------------------------------------------------------------------
National Association of Securities Dealers, Inc.
By:-------------------------------------------------------------------
National Stock Exchange
By:-------------------------------------------------------------------
New York Stock Exchange, Inc.
By:-------------------------------------------------------------------
Pacific Exchange, Inc.
By:-------------------------------------------------------------------
Philadelphia Stock Exchange, Inc.
By:-------------------------------------------------------------------
Exhibit 1
1. Each Participant eligible to receive revenue under the Plan
will receive an annual payment for each calendar year to be
determined by multiplying (i) that Participant's percentage of total
volume in Nasdaq securities reported to the Processor and
disseminated to Vendors for that calendar year by (ii) the total
distributable net operating income (as defined below) for that
calendar year provided, however, that for the implementation year
(as defined in Paragraph 4 below), a Participant's payment shall be
multiplied by the number of months during the implementation year
the interface was in operation divided by twelve. In the event that
total distributable net operating income is negative, each
Participant eligible to receive revenue under the Plan will receive
an annual bill for each calendar year to be determined according to
the same formula (described in this paragraph) for determining
annual payments to eligible Participants.
2. A Participant's percentage of total volume in Nasdaq
securities will be calculated by taking the average of (i) the
Participant's percentage of total trades in Nasdaq securities
reported to the Processor and disseminated to Vendors for the year
and (ii) the Participant's percentage of total share volume in
Nasdaq securities reported to the Processor and disseminated to
Vendors for the year (trade/volume average). For any given year, a
Participant's percentage of total trades shall be calculated by
dividing the total number of trades that that Participant reports to
the Processor as the selling party for that year by the total number
of trades in Nasdaq securities reported to the Processor and
disseminated to Vendors for the year. A Participant's total share
volume shall be calculated by multiplying the total number of trades
in Nasdaq securities in that year that that Participant reports to
the Processor as the selling party multiplied by the number of
shares for each such trade. Unless otherwise stated in this
agreement, a year shall run from January 1 to December 31.
3. For purposes of this Exhibit 1, net distributable operating
income for any particular calendar year shall be calculated by
adding all revenues from the UTP Quote Data Feed, the UTP Trade Data
Feed, the OTC Montage Data Feed, and NQDS, including revenues from
the dissemination of information among Eligible Securities to
foreign marketplaces (collectively, ``the Data Feeds''), and
subtracting from such revenues the costs incurred by the Processor,
set forth below, in collecting, consolidating, validating,
generating, and disseminating the Data Feeds. These costs include,
but are not limited to, the following:
a. The Processor costs directly attributable to creating OTC
Montage Data Feed and NQDS, including:
1. Cost of collecting Participant quotes into the Processor's
quote engine;
2. Cost of processing quotes and creating OTC Montage Data Feed
and NQDS messages within the Processor's quote engine;
3. Cost of the Processor's communication management subsystem
that distributes OTC Montage Data Feed and NQDS to the market data
vendor network for further distribution.
b. The costs directly attributable to creating the UTP Quote
Data Feed, including:
1. Cost of calculating the national best bid and offer price
within the Processor's quote engine;
2. Cost of creating the UTP Quote Data Feed message within the
Processor's quote engine;
3. Cost of the Processor's communication management subsystem
that distributes the UTP Quote Data Feed to the market data vendors'
networks for further distribution.
c. The costs directly attributable to creating the UTP Trade
Data Feed, including:
1. Cost of determining the appropriate last sale price and
volume amount within the Processor's trade engine;
2. Cost of utilizing the Processor's trade engine to distribute
the UTP Trade Data Feed for distribution to the market data vendors.
d. The additional costs that are shared across all Data Feeds,
including:
1. Telecommunication Operations costs of supporting the
Participant lines into the Processor's facilities;
2. Telecommunications Operations costs of supporting the
external market data vendor network;
3. Data Products account management and auditing function with
the market data vendors;
4. Market Operations costs to support symbol maintenance, and
other data integrity issues;
5. Overhead costs, including management support of the
Processor, Human Resources, Finance, Legal, and Administrative
Services.
e. Processor costs excluded from the calculation of net
distributable operating income include trade execution costs for
transactions executed using a Nasdaq service and trade report
collection costs reported through a Nasdaq service, as such services
are market functions for which Participants electing to use such
services pay market rate.
f. For the purposes of this provision, the following definitions
shall apply:
1. ``Quote engine'' shall mean the Nasdaq's UNISYS system that
is operated by Nasdaq to collect quotation information for Eligible
Securities;
2. ``Trade engine'' shall mean the Nasdaq Tandem system that is
operated by Nasdaq for the purpose of collecting last sale
information in Eligible Securities.
4. At the time a Participant implements a computer-to-computer-
interface or other Processor-approved electronic interface with the
Processor, the Participant will become eligible to receive revenue
for the year in which the interface is implemented (implementation
year).
5. From the date a Participant is eligible to receive revenue
(implementation date) until December 31 of the implementation year,
Nasdaq shall pay the Participant a pro rata amount of its payment or
bill the Participant for a pro rata amount of its losses for the
implementation year (as calculated in
[[Page 12517]]
Paragraph 1 above). This calculation and resultant payment (or bill)
will be made (or due) within ninety (90) days after the twelfth
month following the implementation date.
For the calendar year subsequent to the implementation year, and
continuing thereafter, the calculation of the Participant's annual
payment or loss will be performed and the payment made or bill
delivered by March 31 of the following year. Estimated quarterly
payments or billings shall be made to each eligible Participant
within 45 days following the end of each calendar quarter in which
the Participant is eligible to receive revenue, provided that the
total of such estimated payments or billings shall be reconciled at
the end of each calendar year and, if necessary, adjusted by March
31st of the following year. Interest shall be included in quarterly
payments and in adjusted payments made on March 31st of the
following year. Such interest shall accrue monthly during the period
in which revenue was earned and not yet paid and will be based on
the 90-day Treasury bill rate in effect at the end of the quarter in
which the payment is made. Interest shall not accrue during the
period of up to 45 days between the end of each calendar quarter and
the date on which an estimated quarterly payment or billing is made.
In conjunction with calculating estimated quarterly and
reconciled annual payments under this Exhibit 1, the Processor shall
submit to the Participants an itemized statement setting forth the
basis upon which net operating income was calculated, including an
itemized statement of the Processor costs set forth in Paragraph 3
of this Exhibit. Such Processor costs shall be reconciled annually
based solely on the Processor's audited annual financial
information. By majority vote of the Operating Committee, the
Processor shall engage an independent auditor to audit the
Processor's costs or other calculation(s), the cost of which audit
shall be shared equally by all Participants. The Processor agrees to
cooperate fully in providing the information necessary to complete
such audit.
[FR Doc. 05-4946 Filed 3-11-05; 8:45 am]
BILLING CODE 8010-01-P